Finance companies must get credit ratings
The Reserve Bank has now officially become the regulator of the non-bank deposit-taking sector and all finance companies will have to get ratings.
Thursday, September 4th 2008, 6:53AM
“This is not intended to be a ‘quick fix’ response to current challenges facing the non-bank sector,” Finance Minister Michael Cullen says. “The new legislation is intended to raise standards across the industry and to improve the future resilience of the sector.”
Reserve Bank governor Alan Bollard is confident that the new legislation will provide a strong basis for confidence in the deposit-taking sector, which includes finance companies, building societies and credit unions.
The bank's role will be to require information from trustees of deposit takers, to develop and enforce minimum prudential and governance requirements, and to administer credit rating requirements.
"We are encouraging non-bank deposit takers to move towards adopting the new regulatory standards as soon as possible. Trustees will continue to be front-line supervisors of deposit takers, and we look forward to working proactively with trustees as they work towards a more enduring role in the sector," Bollard says.
"Credit ratings from reputable rating agencies will play an important role in the new regulatory arrangements. Credit ratings assist depositors to compare the level of risk they are taking with the return they are getting when they invest in a deposit taker."
He says the bank will engage with stakeholders, including deposit takers and trustees, in developing the regulations. It will also work with the Securities Commission to revise and simplify public disclosure requirements for deposit takers.
The Bank will be working to develop and introduce new regulations for the industry over the next two years. These regulations will introduce consistent standards for key risk areas such as financial strength (capital), access to cash (liquidity) and lending to associated parties.
It is expected that these new rules will be introduced in 2010.
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